11/02/26
Q&A: Hydrogen industry banks on EU mandated demand
Brussels, 11 February (Argus) — The EU may only secure half its 10mn t of
domestic hydrogen production goal by 2030, but lead markets and legally mandated
demand mechanisms — including via made-in-Europe obligations — can promote
uptake alongside the bloc's aspirational goals, Hydrogen Europe's Director for
transport, industrial policy and sustainability Laurent Donceel told Argus . How
important do you see lead markets legislation for hydrogen? This is a whole new
political priority — creating demand for made-in-Europe sustainable products.
The upcoming Industrial Accelerator Act focuses on creating lead markets through
public procurement and subsidies. But mechanisms like revision of car and van
CO2 standards may be equally important, providing captive demand for projects
like Stegra in Sweden, Salzgitter in Germany and Hydnum Steel in Portugal. The
new CO2 car standards introduce 10pc compliance options including up to 3pc
sustainable fuels and e-fuels and 7pc credits for clean steel. If manufacturers
utilize 7pc for clean steel credits, under the forthcoming legislation, this
could drive demand for 6mn t of green steel by 2035, requiring roughly 500,000t
of green hydrogen on top of RED III targets. This is why the revised CO2
standards are so interesting. How will policy discussions in the European
Parliament and among EU states impact uptake? European Commission analysis shows
hydrogen would cover 10pc of energy end-use in Europe by 2050 as oil and gas
decline. E-fuels would cover an extra 7pc — it's massive. Building on shortfalls
in the Renewable Energy Directive (RED), many sectors could rely on e-fuels to
comply with the maritime renewable fuel mandate, aviation and CO2 standards for
cars. On revision of the emissions trading system (ETS), this should be the tool
to cover the price gap between sustainable fuels, e-fuels, and fossil fuels for
maritime, aviation, and other sectors. Free allowances must be conditional, tied
to clean fuel uptake and decarbonization investments rather than granted
unconditionally. Carbon prices are reaching €90/t — the highest since 2023. We
understand sectors are concerned about competitiveness. But free allowances need
to be linked to clear carbon leakage analysis and decarbonization investments.
Will reform of the EU's carbon border threaten investments? The newly proposed
article 27a in the reform of the carbon border adjustment mechanism (CBAM)
creates a really bad signal. This clause allows the European Commission to
consider exempting sectors from CBAM if there's proven market impact. We've
already seen some big projects put on hold because of this concern. What do you
want then? We're asking for article 27a to be scrapped entirely . The terms are
pretty vague. It could happen retroactively. And there's no clarity as to how
such a decision would be taken by the European Commission. This is a sword of
Damocles hanging over all projects, including blue hydrogen [produced from
natural gas] with carbon capture and storage. In the European Parliament there's
good awareness of the dangers across parties. We hope member states do not only
look from the side of agricultural policy and farmers, but for all clean
industries pursuing decarbonization. Our assessment shows fertilizer price
increases from CBAM in 2026 would be minimal, despite certain agricultural
ministers' claims. Are EU states struggling to implement EU renewable goals for
hydrogen? Targets are going to be hard to reach, with much of the demand coming
through the refinery route. The 42.5pc renewable hydrogen target for industrial
consumption faces significant headwinds due to cost issues in fertilizers, steel
and ammonia. High energy costs and low willingness to pay make industrial
decarbonization challenging. Together with developments in e-fuels, aviation and
maritime, you'll get roughly 60pc of all regulatory mandated demand for
hydrogen. Projects need captive demand. When we have harmonized regulation and
strong penalties, you know that it is going to create the demand. The biggest is
aviation. A full 1.2pc of fuel delivered at European airports in 2030 has to be
synthetic sustainable aviation fuel (e-SAF). With 10pc aviation growth, you're
at 49mn t of kerosene in 2030. Take 1.2pc of that — it's actually quite a big
future market for e-fuels. Of the 2.8mn t of green hydrogen required by 2030
under RED III, data suggest we'll reach 1.7mn t through projects currently in
the pipeline, refinery routes, aviation and maritime. That means some 85pc from
domestic production and 15pc from imports based on binding agreements. That
leaves roughly 40pc uncovered. Despite the EU likely falling short of the
original aspiration of 10mn t domestic and 10mn t imports, the increase remains
substantial. Between 2024 and 2030, we're seeing almost fivefold growth in
hydrogen production from projects under construction or with final investment
decisions. Are you having difficulties with the Union Database (UDB)? The UDB is
a big issue. We are very concerned it's not going as fast as we want. It's
important for end-users to show sustainability. But the whole framework of the
mechanism is still not functioning, which slows down contracts between
off-takers and producers. Originally designed for biofuels, it's now extending
to sustainable aviation fuels, maritime fuels, and additional end-users. As you
create new targets for end-users like maritime and aviation, they also need
access to the UDB. It's turning into quite a monster of a tool, but in the end
it should be the main point of reference. By Dafydd ab Iago Send comments and
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